We work with NPS a lot in our line of work. The corporations we work with ask for our help in generating their NPS and doing deeper level analysis on promoters / detractors, private equity firms ask us to gather NPS data on targets vs. peers to see if they really “stand out”, and hedge funds have us gather NPS data to pick winners and losers within verticals and to validate what they are told by management.
For the most part, NPS is a fairly straightforward calculation. You ask customers to rate how likely they would be to recommend a product or a service to a friend or colleague. If they select 0-6 they are counted as a detractor, 7-8’s are considerd passive and are not included in the calculation, and 9-10’s are counted as promoters. You take the % who are promoters and subtract the detractors, and you get your NPS. We objectively know what a “good” vs “bad” NPS is, we can compare NPS across peer groups, and we can track changes in NPS over time.
The part that isn’t as clear:
Who should answer the NPS question?
The guidance for the NPS question is to ask “customers” how likely they are to recommend a product or service. What we have found in our work with corporations, however, is that there a number of ways to interpret / set up who you classify as a customer for your NPS question and where you find them. Are you asking anyone who has ever been a customer? Is the NPS generated only by customers who have bought recently or more than once? Is the NPS asked of people who have affirmatively joined a customer email list (people who have joined email lists will offer more positive feedback)? Is the NPS recorded at the point of sale? Based on who you ask and where you find them, there are certainly a number of ways to “put your thumb on the scale” – intentionally or unintentionally. When a company touts a very strong NPS it can be a great indicator of positive future organic growt – but we would encourage you to understand the context we described above, especially when you are comparing the NPS to peers. Ask management: how did you determine who took your NPS question, and how did you find them?
Another question to ask:
When was your NPS most recently recorded?
Quick story: One time we had a situation in which company management was telling a client of ours than their NPS was higher than what our surveys were indicating. What was the reason for the discrepancy? The company had not done work to update their NPS for 2 years. We want back down the curve because we had history and found that our NPS reading for them from 2 years ago was higher and matched what the company was currently reporting. Because they had not run their NPS survey in two years they were honestly reporting their most recent result, but their most recent result being two years old was hiding an important observation about their NPS.
There are many more nuances to NPS – like understanding how and why they typically change over time and getting to deeper levels, like asking promoters how many people they think they have recommended the product/service to and asking detractors for color on why their experience was so poor (is it something that can be improved, or is there an inherent flaw hiding)?